Many employers retain a third-party consumer reporting agency, also known as a CRA, to obtain consumer reports in California. Consumer reports include background checks or credit checks which are used in the hiring process.
When a California employer uses a consumer report, it must comply with the federal Fair Credit Reporting Act (FCRA). The FCRA has its own notice and authorization requirements when a consumer reporting agency runs a person’s consumer reports. In addition to the FCRA, employers in California must comply with two other laws when obtaining an applicant or employee’s consumer report: (1) California’s Investigative Consumer Reporting Agencies Act (ICRAA) and (2) California Credit Reporting Agencies Act (CCRRA).
Fair Credit Reporting Act and California’s Investigative Privacy Laws
Congress passed The Fair Credit Reporting Act (FCRA) to regulate how businesses obtain and use personal information. After the FCRA, California passed the Investigative Consumer Reporting Agencies Act (ICRAA) and the California Credit Reporting Agencies Act (CCRAA), providing more protections for California employees.
Investigative Consumer Reporting Agencies Act (ICRAA)
The ICRAA governs “investigative consumer report[s].” An “investigative consumer report” contains the following information:
- Character
- Reputation
- Personal characteristics
- Mode of living.
It does not include credit reports, which are covered under the CCRA.
Under the ICRAA, an investigative consumer report is obtained through statements from personal interviews with neighbors, friends, or associates. When this information is collected by an outside agency for employment purposes, they are considered to be consumer reports.
The ICRAA provides specific rules for investigative consumer reporting agencies or third-party agencies who collect and assemble these types of investigative consumer reports.
When an outside screeing company or third-party prepares the investigative consumer report, the applicant or employee has a right to:
- receive notice detailing
- the purpose of the report
- contact information for the screening company (name, address, and telephone number)
- a summary concerning an applicant/employee’s right to view and receive a copy of the report
- a checked box option so that an individual can request a copy of the report
- the employer must provide “clear and conspicuous disclosure in writing.”
- the applicant/employee must give written authorization for the report’s procurement (unless the report is for suspicion of wrongdoing or misconduct)
California Credit Reporting Agencies Act (CCRAA)
The California Consumer Credit Reporting Agencies Act (CCRAA) applies to “consumer credit report.” This does not include character information which is covered under the ICRAA. California prohibits most employers from obtaining a consumer report, except in limited circumstances.
Employers in California are limited when they can request a consumer report, which essentially means a credit report. Under the CCRAA, employers must have a “legitimate business need” to access a credit record. While California limits “investigative consumer reports” to those obtained through personal interviews, the CCRAA does not have the same limitation.
An employer has a legitimate business need to see an applicant’s or employee’s consumer credit if that report is used to evaluate an applicant or promoting, retaining, or reassigning a current employee.
California restricts the definition of a “legitimate business need” under California Civil Code § 1785.20.5 and California Labor Code § 1024.5. These include:
- Positions at California’s Department of Justice;
- Managerial positions;
- Law Enforcement Officers, sworn peace officers, or other law enforcement positions;
- Those who are required by law to have a credit check performed;
- Positions involving regular access to personal information such as bank or credit card account information, social security numbers, and dates of births of the employer and any of its clients.
- Positions where an employee will be a signatory on the employer’s bank or credit card account, or where they can authorize money transfers or enter into financial contracts on the employer’s behalf;
- Positions involving trade secrets or proprietary information;
- Jobs involving regular access to $10,000 or more of cash.
The CCRAA requires employers to give the employee written notice informing the employee or applicant that it will obtain the credit report. It must also identify the specific basis under Labor Code 1024.5(a). However, unlike the ICRAA, which requires written authorization, the CCRAA does not.
When an employer suspects wrongdoing or misconduct, then consent is not required.
Overlap of the Fair Credit Reporting Act, the IRCAA, and the CCRAA
Based on public information and personal interviews, background checks containing overlaps in information relating to both character and creditworthiness can present inconsistent obligations for an employer. An employer has the responsibility to ensure that they elicit background check applications with the correct information, including notice and consent requirements. In reality, though, some employers may not be compliant. If you feel you were the victim of a privacy violation, employment attorneys at SANFORD A. KASSEL, A Professional Law Corporation can evaluate your claim.
